Workers' confidence about future retirement sinks

The economy is improving and so is employment, but workers' optimism about a comfortable retirement has fallen to a new low, according to the annual Retirement Confidence Survey released Tuesday.

Just over half of workers say they are either very confident about their retirement prospects or somewhat so. But 28 percent — a record high —have no confidence while an additional 21 percent express pessimism about their retirement future.

The survey by the Employment Benefit Research Institute gauged the outlook on retirement among 1,254 U.S.workers and retirees interviewed in January. Many said they have more immediate financial worries than retirement, and their nest eggs have suffered as a result. But the study authors found some positive trends.

"Workers' confidence in their ability to save for retirement is still trundling along at historically low levels," said Nevin Adams, a co-author of the study. But "people seem to have a growing awareness of the realities of retirement needs and a willingness to consider some pretty large savings targets to do something about it."

This is the 23rd annual checkup by EBRI. Workers were at their most confident about their future in 2007, before the start of the recession and the stock market crash of 2008.

Among this year's findings:

Despite many workers' dim outlook on retirement, they are either not saving for their future or have socked away only enough to support a brief retirement.

In the past five years, the percentage of workers saving for retirement fell from 65 percent to 57 percent. And nearly 60 percent of savers have less than $25,000 salted away, excluding their homes or any pensions they might receive.

EBRI found workers are distracted by more immediate financial concerns— job uncertainty and making ends meet.

Debt also is a problem for more than half of workers and nearly four of 10 retirees. Asked whether they could come up with $2,000 in the next month for an emergency, only about half said they could.

Roughly one-quarter of workers paid for investment advice. Of those, only 27 percent followed all the adviser's recommendations.

Adams said researchers found the reason so many don't follow all the advice they paid for "had to do with a lack of trust."

The study found a few positive trends.

For instance, seven of 10 workers said they expect they will have to set aside a double-digit percentage of their income for retirement — a more realistic picture, said Greg Burrows, senior vice president of retirement and investor services at Principal Financial Group, one of the study's sponsors.

Principal recommends that workers save 11 percent to 15 percent of every year's pay — including any match by an employer — throughout their careers to build a retirement nest egg.

And many employees who aren't in a retirement plan at work now would be willing to have 6 percent of their pay automatically contributed to such a plan, Burrows said. That's twice the amount of the usual automatic contribution, he noted.

Still, the study's findings can be discouraging to workers.

Adams said one way for workers to feel better is to calculate how much they will need to save for retirement. Currently, 45 percent of workers surveyed just guess.

But those who have taken the time to figure their needs, through the help of a professional or by using an online retirement calculator, "feel better about their situation, even if they have to set higher goals, " Adams said.